The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good) results in

Stanley Jevons, an economist in the nineteenth century, noted a high correlation between economic prosperity and sunspots. Based on this observation he developed a "sunspot theory" of how the economy operated. We now know that Jevons

A) committed the ceteris paribus error. B) committed the fallacy of composition. C) was confusing causality. D) showed good reasoning for the nineteenth but not the twentieth century

If the Fed shifts to a more restrictive monetary policy in order to help control inflation, the policy shift will generally

a. stimulate aggregate demand and real output as soon as the policy is instituted. b. reduce aggregate demand immediately and quickly bring the inflation under control. c. reduce aggregate demand and help bring the inflation under control, but the primary effects may not be felt for several months (or quarters). d. lower real interest rates in the short run, but in the long run, real interest rates will rise.